PATENT CASE LAW UPDATE

PATENT CASE LAW UPDATE Intellectual Property Owners Association 40 th Annual Meeting September 9, 2012 Panel Members: Paul Berghoff, McDonnell Boehnen Hulbert & Berghoff LLP Prof. Dennis Crouch, University of Missouri School of Law Suzanne Michel,* Google Inc. Roy Waldron, Pfizer * Prepared slides

Case and Topic List Patentability and enforceability 35 USC 101 Mayo v. Prometheus CLS Bank v. Alice Bancorp v. Sun Life AMP v. Myriad The Aftermath of Therasense Therasense v. Becton Dickinson, on remand to the district court Aventis v. Hospira Claim Interpretation Retractable Technologies, denial from rehearing en banc

Case and Topic List Infringement Marine Polymer Bard v. Gore Momenta v. Amphastar Akamai v. Limelight McKesson v. Epic Remedies Apple v. Motorola (J. Posner) Antitrust Reverse Payment Settlements FTC. w. Watson K-Dur

Patentable Subject Matter Under 35 USC 101

Mayo v. Prometheus Labs Mayo Collaborative Servs. V. Prometheus Labs., Inc., 132 S.Ct. 1289, March 20, 2012 Claims directed to the use of thiopurine drugs to treat autoimmune disease are the invalid under 35 USC 101 Claims recite (as described by the Court) administering a drug; determining the amount of metabolite in patient s blood; wherein the metabolite levels indicate whether to increase or decrease dosage of the drug.

Mayo v. Prometheus Labs. Court states a basic underlying concern for innovation [M]onopolization of [phenomena of nature, mental processes, and abstract intellectual concepts] through the grant of a patent might tend to impede innovation more than it would tend to promote it. Slip op. at 2 [T]here is a danger that the grant of patents that tie up their use will inhibit future innovation premised upon them, a danger that becomes acute when a patented process amounts to no more than an instruction to apply the natural law, or otherwise forecloses more future invention than the underlying discovery could reasonably justify. Slip. op. at 17.

Mayo v. Prometheus Labs. Innovation concern leads Court to require inventive concept to satisfy 101 [A] process that focuses upon the use of a natural law [must] also contain other elements or a combination of elements, sometimes referred to as an inventive concept, sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself. Slip. op. at 3 (citing Flook and Bilski). The question before us is whether the claims do significantly more than simply describe these natural relations [between metabolite level and efficacy]. Slip op. at 8 (emphasis added). These instructions [to administer drug and measure metabolite] add nothing specific to the laws of nature other than what is wellunderstood, routine, conventional activity. Slip op. at 13.

CLS Bank v. Alice CLS Bank Intern. v. Alice Corp. Pty. Ltd., 103 U.S.P.Q.2d 1297 (Fed. Cir. July 9, 2012) (J. Linn, with J. O Malley in majority; J. Prost in dissent) First Federal Circuit decision, post-mayo to address whether software claims satisfy 35 USC 101 Claims cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between two parties to eliminate settlement risk that only one side will pay Various claims recite A method of exchanging obligations without recitation of software or computer structure A data processing system including a data storage unit having the transaction information stored A computer readable storage medium having a program stored that conducts the method of exchanging obligations

CLS Bank v. Alice Did the Federal Circuit majority reject the Supreme Court s focus on inventive concept in a Section 101 analysis? In contrast to 101, which sets forth the type of subject matter that is patent eligible, 102 and 103 broadly ensure that the public remains free to use that which is known and obvious variants thereof. In addition, 112 protects the public storehouse of knowledge by preventing persons from obtaining patent protection for inventions not fully disclosed, enabled or claimed with particularity.... Is should be self-evident that each of these four statutory provisions 101, 102, 103 and 112 serves a different purpose and plays a distinctly different role. Slip op. at 12

CLS Bank v. Alice J. Prost, dissenting [W]e do not write on a blank slate.... Now there is no doubt that to be patent eligible under 101, the claims must include an inventive concept. The majority has failed to follow the Supreme Court s instructions not just in its holding, but more importantly in its approach. Slip op. at 2-3.

CLS Bank v. Alice Federal Circuit concern with defining abstract idea The abstractness of the abstract ideas test to patent eligibility has become a serious problem, leading to great uncertainty and to the devaluing of inventions of practical utility and economic potential.... The dividing line between inventions that are directed to patent ineligible abstract ideas and those that are not remains elusive. Slip op. at 13-14.

CLS Bank v. Alice Court articulates a low bar for abstractness When taking all claim limitations into account, it must be manifestly evident that a claim is directed to a patent ineligible abstract idea to fail 101. Slip op. at 20 (emphasis added). Unless the single most reasonable understanding is that a claim is directed to nothing more than a fundamental truth or disembodied concept, with no limitations in the claim attaching that idea to a specific application, it is inappropriate to hold that the claim is directed to a patent ineligible abstract idea under 35 USC 101. Slip op. at 21 (emphasis added).

CLS Bank v. Alice What makes these claims not abstract? Unlike the Bilski line of cases, however, it is difficult to conclude that the computer limitations here do not play a significant part in the performance of the invention or that the claims are not limited to a very specific application of the concept of using an intermediary to help consummate exchanges between parties. Slip op. at 26. But dissent responds that majority points to limitations regarding the conduct of the financial transaction and not limitations regarding how the software or hardware functions. Dissent at 3.

CLS Bank v. Alice Analysis of J. Prost, dissenting The idea of credit intermediation is abstract. The computer implementation does not make it patentable. The patent itself makes clear there is nothing inventive in the computer implementation. The patent relies solely on the description of the financial transactions as inventive. Slip op. at 4-11.

Bancorp v. Sun Life Bancorp Services, L.L.C. v. Sun Life Assur. Co. of Canada, 2012 WL 3037176 (Fed. Cir. July 26, 2012) (J. Lourie, with Prost and Wallach) Method claims, without computer limitations, for managing a life insurance policy involving various calculations regarding value Computer-implemented systems claims for performing the method Computer readable media claims for controlling a computer to perform the method

Bancorp. v. Sun Life Does recitation of a computer system or computer-readable media save a claim under 35 USC 101? [T]he use of a computer in an otherwise patent-ineligible process for no more than its most basic function making calculations or computations fails to circumvent the prohibition against patenting abstract ideas and mental processes. To salvage an otherwise patent-ineligible process, a computer must be integral to the claimed invention, facilitating the process in a way that a person making calculations or computations could not. Slip op. at 19.

Bancorp v. Sun Life What is the role of the computer in these claims? The computer required by some of Bancorp s claims is employed only for its most basic function, the performance of repetitive calculations, and as such does not impose meaningful limits on the scope of those claims. Slip op. at 20. It is the management of the life insurance policy that is integral to each of Bancorp s claims at issue, not the computer machinery that may be used to accomplish it. Slip op. at 23.

Bancorp v. Sun Life Are these claims abstract? Section 101 analysis requires setting aside the insignificant computer-based limitation and examining the additional features that remain in the claims. Slip op. at 23. The claims require determining policy values and their subsequent manipulation a matter of mere mathematical computation. Id. There is no material difference between the claims invalidated in Bilski and those at issue here. Slip op. at 20. Finally, our conclusion is not inconsistent with CLS. (?)

AMP v. Myriad Genetics Association for Molecular Pathology v. USPTO & Myriad Genetics, 653 F.3d 1329 (Fed. Cir. July 29, 2011) Upheld claim to an isolated gene sequence as patentable subject matter under 35 USC 101 because the claimed cdna is different than native chromosomal DNA and not found in nature. Vacated by the Supreme Court and remanded to the Federal Circuit for reconsideration in light of Mayo v. Prometheus on March 26, 2012 Reargued before the Federal Circuit on July 20, 2012, decision pending How will Mayo affect the analysis given that the Myriad claims recite a composition of matter and the Prometheus claims recite a process?

Enforceability: The Aftermath of Therasense

The Aftermath of Therasense Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. May 25, 2011) (en banc) Raised the standard for proving inequitable conduct by requiring that challenger prove by clear and convincing evidence applicant misrepresented or omitted material information with the specific intent to deceive the PTO. Proving specific intent requires evidence of a deliberate decision to deceive. When circumstantial evidence is used, intent to deceive must be the single most reasonable inference. Proving materiality requires evidence that but-for the deception, the PTO would not have allowed the claim except in cases involving egregious misconduct.

The Aftermath of Therasense District Courts have actively dismissed inequitable conduct claims after Therasense for failing to allege "butfor" materiality and/or specific intent to deceive the PTO. See, e.g. Schwendimann v. Arkwright Advanced Coating, Inc., Case No. 11-820 ADM/JSM (D. Minn. Sept. 8, 2011) But, on remand from the Federal Circuit, the district court again found inequitable conduct in Therasense v. Becton Dickinson, No. C 04-02123 (N.D. Cal, Mar. 27, 2012)

The Aftermath of Therasense Aventis Pharma v. Hospira, 675 F.3d 1324 (Fed. Cir. April 9, 2012) The Federal Circuit upheld a finding of inequitable conduct where patent applicant failed to notify the PTO of a known, material reference Court held some claims obvious in light of the withheld reference. This proved materiality the PTO would not have allowed the claims but for deception District court found inventor had learned valuable information from reference and explanation for withholding reference lacked credibility. Fed. Cir. found no clear error in conclusion that intent to deceive was the single most reasonable inference

Claim Construction

Retractable Tech. v. Becton, Dickinson Retractable Technologies, Inc. v. Becton, Dickinson & Co., 653 F.3d 1296 (Fed. Cir. July 8, 2011) (panel opinion) Majority (J. Lourie, Plager): In a claim directed to a retractable syringe, the district court erred in its construction of the claim term body of the syringe by not limiting it to one piece Specifications indicate the claimed body is one piece by Distinguishing prior art comprised of multiple pieces Containing figures that only show a syringe body with one piece It is axiomatic that the claim construction process entails more than viewing the claim language in isolation. Claim language must always be read in view of the written description.... In reviewing the intrinsic record to construe the claims, we strive to capture the scope of the actual invention, rather than... Allow the claim language to become divorced from what the specification conveys is the invention. Slip op. at 16-17.

Retractable Tech. v. Becton, Dickinson J. Plager, concurring in panel opinion However much desired by the claim drafters, who want claims that serve as business weapons and litigation threats, the claims cannot go beyond the actual invention that entitles the inventor to a patent. For that we look to the written description. Slip op. at 2.

Retractable Tech. v. Becton, Dickinson C.J. Rader, dissenting in panel opinion: the language of the claims makes clear that body is not limited to a one-piece structure Claim language is to be given its ordinary and customary meaning, as understood by a person of ordinary skill in the art at the time of the invention. In this case, neither party contends that body has a special technical meaning in the field of the art, and thus claim construction requires little more than the application of the widely accepted meaning of commonly understood words. Slip op. at 2. Specifications do not contain an intentional disclaimer or disavowal of claim scope. Slip op. at 3.

Retractable Tech v. Becton, Dickinson 659 F.3 1369 (Fed. Cir. October 31, 2011) (Denial of Petition for Rehearing en banc) Dissent of C.J. Rader and J. Moore Despite the crucial role that claim construction plays in patent litigation, our rules are still ill-defined and inconsistently applied, even by us. Slip op. at 1. Retractable illustrates a fundamental split within the court. Slip op. at 7. The specification cannot be used to narrow a claim term to deviate from the plain and ordinary meaning unless the inventor acted as his own lexicographer or intentionally disclaimed or disavowed claim scope. Slip op. at 3.

Retractable Tech v. Becton, Dickinson Dissent of J. O Malley from denial of petition for rehearing en banc Court should revisit and reverse its decision to treat claim construction has a pure question of law, subject to de novo review on appeal with no deference granted to the district court Supreme Court in Markman called claim construction a mongrel practices involving legal and factual issues District courts take live testimony and spends days on claim interpretation C.J. Rader and J. Moore would also grant en banc review to consider whether deference should be given to district court claim construction

Retractable Tech v. Becton, Dickinson Supreme Court review?? The Court requested the Solicitor General s views on whether to grant cert. The SG s brief will likely be filed by the opening of the Court s next term in October.

Infringement

Marine Polymer v. Hemcon Marine Polymer Technologies, Inc. v. Hemcon, Inc., 652 F.3d 1350 (Fed. Cir. March 14, 2012) (en banc decision overruling panel decision) Panel opinion held that arguments concerning claim scope made during reexamination should be considered amendments that create an intervening right defense. By a 6-4 vote, en banc opinion reversed and held that statutory intervening rights arise only when the text of claims are amended or new claims are added under the plain language of 35 USC 252, 307.

Bard v. Gore Bard Peripheral Vascular, Inc. v. C.R. Gore, Inc., 682 F.3d 1003, (Fed. Cir. June 14, 2012) Upon a petition for rehearing, the panel vacated the portions of its original opinion related to willful infringement. To establish willful infringement, Seagate requires clear and convincing evidence that (1) an infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and (2) the objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.

Bard v. Gore Federal Circuit held that the objective determination of recklessness, even though predicated on underlying mixed questions of law and fact, is best decided by the judge as a question of law subject to de novo review. Slip op. at 6-7. Does this open the door to eliminate allegations of willful infringement from a case on summary judgment where a judge determines that the objective prong is not met?

Momenta v. Amphastar Momenta Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc., Federal Circuit, Aug. 3, 2012 Claim covered method of analyzing drug enoxaparin Momenta alleged that generic drug manufacturer Amphastar infringed by conducting tests and submitting result requested by FDA after approval of the generic drug. Court held there was no infringement under 35 USC 271(e)(1) because testing was reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use or sale of drugs.

Akamai v. Limelight Akamai Technologies, Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. Dec. 20, 2010), panel opinion Held that claims directed to a method of storing web page content was not jointly infringed where Limelight performed the majority of steps but it customers performed at least one step As a matter of Federal Circuit law, there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to perform the steps. Slip op. at 14.

Akamai v. Limelight Akamai Technologies, Inc. v. Limelight Networks, Inc., en banc: Federal Circuit heard oral argument on November 18, 2011. Decision pending Question presented: If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

McKesson v. Epic McKesson Technologies Inc. v. Epic Systems Corp., 98 USPQ 2d 1281) (Fed. Cir. April 12, 2011) (panel opinion) Held no infringement where a health care provider performed some claim steps and encouraged users to perform the others. There was no direct infringer because users were not in an agency relationship or obligated to complete the steps. Without an underlying direct infringer, there could be no liability for inducement to infringe. J. Bryson felt bound by precedent, but questioned whether precedent was correct. J. Newman in dissent said precedent did not require analysis

McKesson v. Epic En banc case argued same day as Akami, November 18, 2011; decision pending En banc questions: If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement? See Fromson v. Advance Offset Plate, Inc., 720 F.2d 1565 (Fed Cir. 1983). Does the nature of the relationship between the relevant actors e.g., service provider/user; doctor/patient affect the question of direct or indirect infringement liability?

Remedies and Settlements

Apple v. Motorola (J. Posner) Apple, Inc. v. Motorola Mobility, Inc., 11-CV-8540 (N.D. Ill. June 22, 2012) (J. Posner sitting by designation as trial judge) Infringement claims by both parties dismissed on the eve of trial because neither party offered evidence sufficient to prove damages or demonstrate the right to an injunction. Although courts can award nominal damages, parties cannot sue for only nominal damages because there is no case or controversy supporting jurisdiction. Slip op. at 10. For a variety of reasons patents in the field of information technology often have little if any value except defensively. Slip op. at 25.

Apple v. Motorola Damages: Testimony of both sides experts excluded under Daubert. Expert testimony must establish a prima facie case of the proper measure of damages. Slip op. at 7. Insufficient evidence of cost of non-infringing alternatives or the cost of designing around offered. Slip op. 3-6. Rejects arguments asking for damages for patent in suit based on 40-50% of standard fee for portfolio license. Slip op. at 15-18.

Apple v. Motorola Parties cannot prove entitlement to injunctions For Motorola s standard essential patents subject to a RAND commitment, injunction is not justified unless infringer refuses to pay a RAND royalty. Slip op. at 18-19. Apple cannot show that infringement causes harm such as loss of market share or good will. Patents are easy to design around and it is implausible that infringement has cost market share. Slip op. at 24, 33. [C]onsumers regard for [the iphone] have, so far as the record shows, nothing to do with the handful of patent claims that I had ruled presented triable issues of infringement. Slip op. at 30. Harm caused by removing Motorola from the market would be disproportionate. On- going royalty would be a better remedy, but Apple has not proven what that should be. Slip. op at 23-29.

FTC v. Watson FTC v. Watson Pharmaceuticals, 677 F.3d 1298 (11 th Cir. April 25, 2012) Patent infringement case between brand and generic drug company settled with reverse payment from patent owner to alleged infringer, who delays market entry until agreed upon date. [A]bsent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent. Court refuses to consider validity and infringement issues in evaluating scope of the patent as too perilous an enterprise to service as a basis for antitrust liability.

In re K-Dur Antitrust Lit. In re K-Dur Antitrust Lit., (3 rd Cir. July 16, 2012) Reverse payment settlement between Schering-Plough and generic challengers of patent on coating for potassium supplements violates antitrust laws. FTC lost case on the same agreement before the 11 th Cir. In 2005 [A]ny payment from a patent holder to a generic patent challenger who agrees to delay entry into the market [is] prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment was (1) for a purpose other than delayed entry or (2) offers some procompetitive benefit. Slip op. at 33.

In re K-Dur Antitrust Lit [T]here is no need to consider the merits of the underlying patent suit We also emphasize that nothing in the rule of reason test that we adopt here limits the ability of parties to reach settlements based on a negotiated entry date for marketing of a generic drug Slip op. at 32. i.e., settlement for an entry date without exchange of money is ok. Supreme Court review of one these reverse payment cases seems likely.